Court of Chancery Rule 15(aaa) Expanded…With a Twist

It has long been the case that when a Defendant in a Delaware Court of Chancery matter files a motion to dismiss pursuant to rules 12(b)(6) or 23.1, the plaintiff has one of two choices: 1) amend her complaint instead of oppose the motion, or 2) defend against the motion and risk dismissal with prejudice.

In Otto Candies, LLC v. KPMG, LLP et al., plaintiff initially brought suit in the Superior Court, which upon defendants’ fully briefed and argued motions to dismiss, determined it did not have subject matter jurisdiction. Plaintiff transferred the matter to the Court of Chancery, along with the pending motions to dismiss. Thereafter, the Court dismissed Plaintiff’s claim for lack of personal jurisdiction and failure to state a claim, however, the Court requested additional briefing on whether its dismissal should be with prejudice or without prejudice.

The parties provided supplemental briefing and the Court held that Court of Chancery rule 15(aaa) did indeed apply to transferred cases. However, the Court determined that because this was the first time the Court of Chancery had been faced with this issue, the plaintiff deserved a “mulligan.” As a result, the Court dismissed the matter without prejudice under the “good cause” exception…just this one time.

Read the opinion here.

Chris Lee

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